Transcript File - Mr Tarn

SECTION 1
MONEY
Starter: Mind Mapping
Produce a mind-map on the topics covered so far
Some key elements
-
Financial Capability (centre point)
Personal Lifecycle
Needs & wants
Choices, scarcity, opportunity cost
Costs & benefits
They are all
interlinked
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MONEY
GCSE ECONOMICS: UNIT 11
Choosing to Spend
Mr Tarn
SECTION 1
MONEY
Aims of today’s lesson …
• Understand how markets operate and how
businesses compete
• Understand the reasons why prices change.
• Understand the effects of competition between
businesses on prices, products, quality
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MONEY
Demand and factors that affect spending
•
Demand is the quantity of all goods and services purchased at any
given price
•
Look at the demand schedule below for mars bars
•
Price
Quantity Demanded
£0.20
400
£0.25
350
£0.30
300
£0.35
250
£0.40
200
£0.45
150
£0.50
100
Using the graph paper plot the demand curve using a line graph with
Price on the vertical Y axis and Quantity on the horizontal X axis
SECTION 1
MONEY
Demand and factors that affect spending
• Describe the relationship between the price of mars bars and the
quantity demand
Price (£)
Demand Curve for Mars Bars
0.6
0.5
D
0.4
0.3
D
0.2
0.1
0
100
150
200
250
300
350
400
Quantity Demanded
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Demand and factors that affect spending
• So, as the price increases for a good, the quantity demanded will
fall, and vice versa
• For example consumers will probably start using more gas as
British Gas have dropped their prices by 10 per cent
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MONEY
Over to you...
• Open and compete the document called...
“Understanding the demand curve”
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MONEY
How will your demand change over
the personal life cycle?
• Needs, wants and incomes change significantly over a lifetime
• Initially, a person’s demand is likely to be more for basic household
goods
• With a family, the demand will change to goods and services for the
children
• Once children have left home, people may start to take more meals
out or more expensive holidays as demands on income will be
lower
• In retirement, incomes fall so people may need to cut back on
expenditure
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MONEY
What factors affect our demand for
certain goods and services?
• There are many other factors affecting demand apart from price,
however, that affect our spending decisions
• In pairs discuss what affects your demand for products and
services
• List them on the back of your graph paper!
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MONEY
What factors affect our demand for
certain goods and services?
• There are many other factors affecting demand apart from price,
however, that affect our spending decisions
– income level – the most important
– advertising and branding influence desire and loyalty for a
product
– prices of substitutes (similar goods) and complements (for
example fuel is a complement of cars)
– fashion and peoples’ tastes
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MONEY
Market supply and prices
• Businesses produce goods and services for people to buy so
that the business can make a profit
• The amount they offer for sale is
called ‘supply’
• Supply is the quantity of all goods
and services firms are willing to
produce at any given
price
SECTION 1
MONEY
Market Supply and prices
• Look at the supply schedule below for mars bars
Price
Quantity Supplied
£0.20
100
£0.25
150
£0.30
200
£0.35
250
£0.40
300
£0.45
350
£0.50
400
• Using the same graph plot the supply curve
SECTION 1
MONEY
Market Supply and prices
• Describe the relationship between the price of mars bars and the
quantity demand
Price (£)
• Businesses tend to supply
more, the higher the price
Supply Curve for Mars Bars
0.6
S
0.5
0.4
• The price they charge has to
cover the costs of the
resources used in
production
0.3
0.2
S
0.1
0
100
150
200
250
300
350
400
Quantity Supplied
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MONEY
Market supply and prices
• Factors affecting supply and how much businesses charge
include:
– cost of raw materials
– wage rates – overtime may need to be paid for higher
output
– productivity of the
workers
– The price of
similar products
– VAT (Value Added
Tax)
SECTION 1
MONEY
Over to you...
• Open and compete the document called...
“Understanding the
Supply Curve”
SECTION 1
MONEY
Markets and why prices might change
• When buyers and sellers come together, a market is formed
• For very expensive items, like a house, the buyer and seller negotiate a
selling price individually
• For most goods and services, however, the market price is determined by
the amount buyers are willing to pay and the price that businesses need
to be paid to cover their costs
• If a good does not sell well, suppliers have to lower their price.
• Eventually, the price will settle at a point where supply equals demand,
known as the market price (the intersection of demand & supply on your
graphs)
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MONEY
Markets and why prices might change
cont.
• Prices change when there are changes in demand or supply
• For example, when oil prices are rising, costs for all companies rise, as oil
is needed for energy, transport and heating
• Businesses will have to raise their prices to cover increased production
costs
• A serious health scare can cause a big
fall in demand, and prices will have to fall
to maintain sales
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The effects of competition
• Usually there is more than one supplier for each type of good, so
businesses face competition
• They have to fight to win consumers from other businesses by:
– advertising and branding (e.g. the Andrex puppy and toilet rolls)
– improving quality
– changing the design and features (e.g. frequent updates of mobile
phones)
– lowering the price by improving production methods (e.g. by being
more energy efficient)
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MONEY
The effects of competition
• Consumers can benefit greatly from competition through:
– lower prices (e.g. price wars– supermarkets compete to
provide better value)
– greater variety (e.g. supermarkets
stock value, branded and premium
versions of the same good)
– better quality (e.g. McDonald’s improved
the quality of its coffee by buying better
quality beans)
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MONEY
The effects of competition
• There can also be disadvantages:
– Quality can be lowered as businesses try to cut costs (e.g. some
companies sell clothes and electrical goods that are cheaper
now than they were 15 years ago, but do not last so long)
– After-sales service can suffer if too many resources are put into
sales
SECTION 1
MONEY
Over to you...
• Open and compete the document called...
“The effects of competition”
SECTION 1
MONEY
Extension Tasks...
1.
Start your Economics Glossary for key terms we have covered so far in
the course (template is in the SSA)
2.
Create 5 brainteaser questions from
what we have covered so far which we
will ask your peers
(make sure you know the answers)